User Account

All Pages

What will the annual cash flow be to an investor

Assignment Help Management Theories
Reference no: EM132797079

The Day Company and the Knight Company are identical in every respect except that Day is not levered. Financial information for the two firms appears in the following table. All earnings streams are perpetuities, and neither firm pays taxes. Both firms distribute all earnings available to common stockholders immediately.

Day and Knight Projected operating income is $1,350,000. Year-end interest on debt - Knight has 107,500. Market value of stock is $4,800,000 for day and $2,900,000 for Knight. Market value of debt for Knight $2,150,000

a-1.What will the annual cash flow be to an investor who purchases 10 percent of Knight's equity? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

a-2.What is the annual net cash flow to the investor if 10 percent of Day's equity is purchased instead? Assume that borrowing occurs so that the net initial investment in each company is equal. The interest rate on debt is 5 percent per year. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Reference no: EM132797079

Questions Cloud

How can events in job-order costing system affect financial : Compare and contrast job-order and process costing systems. How can events in a job-order costing system affect financial statements?
Describe the range of resources : Every industry publishes many trade publications, periodicals, and academic journals. Successful professionals regularly review the literature.
Best structure for holding the shares : What would be the best structure for holding the shares? You are not restricted to holding all the shares in one structure.
Calculate break-even point in units sold and total revenues : Calculate the break-even point in units sold and total revenues. Preppy Co. makes and sells a single product. The current selling price is $30 per unit.
What will the annual cash flow be to an investor : The Day Company and the Knight Company are identical in every respect except that Day is not levered. Financial information for the two firms appears
What is a post audit and how can provide useful input : What is a post audit and how can it provide useful input for future capital investment decision, especially those involving advanced technology?
Discuss immigration in general : Discuss immigration in general and why people immigrate as well as some of the policies and complexity of immigration. The response must be typed.
What is the profit expressed as a present value : What is the strategy followed to make a profit from the arbitrage opportunity? What is the profit expressed as a present value?
Analyzing the target company revenues : Revenue recognition policies of the target company are one of the most important areas that must be reviewed. What are the three items or factors

Reviews

Write a Review

Management Theories Questions & Answers

  What motivations typically cause firms

What motivations typically cause firms to initiate a facililties location or relocation projects?

  What are the pros and cons of linking incentive

What are the pros and cons of linking incentive pay to individual performance? How can organizations address the negatives?

  How would you decide in given case

The company argued that its no-solicitation rule would have been enforced against not merely union solicitation but any solicitation. How would you decide? Why?

  What is mental element required for depraved heart murder

Charged with second-degree murder, M.C.L. s 750.317; M.S.A. s 28.549, Daniel Lindley Thomas, (the defendant), was convicted by a jury of involuntary.

  What course of action should you follow

You know that his doctors and family believe that it is in his best interest to take the medication. What course of action should you follow?

  Evaluation of agency''s public personnel administration

Evaluation of Agency's Public Personnel Administration

  Does a contract exist between thoelkes and the morrisons

After the executed contract was mailed but before it was received in Florida, the Thoelkes called the Morrisons' attorney in Florida and attempted to repudiate the contract. Does a contract exist between the Thoelkes and the Morrisons? Discuss.

  Balance of the purchase price

They will borrow the balance of the purchase price from a local bank. Advise Jacqui and Joanne on a choice of business form. Consider that the enterprise is expected to realize operating losses of $50,000 annually for the first 3 years. During the..

  Was the city correct in given situation

Because the city did not have the funds to pay Nelson, it argued that the contract was illegal and therefore void. Was the city correct? Explain.

  Describe a negotiation for significant purchase

Plan, execute, and describe a negotiation that you are planning on conducting for either a significant purchase (e.g., house, car, major appliance) a significant decision (e.g., a project at work, budgeting process) or a contract negotiation.

  How would you segment the market for the different business

Syracuse, New York-based Carrols Restaurant Group is one of the largest restaurant companies in the nation. With more than 16,000 employees and annual sales.

  How people view a new product or idea

Do research to learn about the use of focus groups to gain insight into how people view a new product or idea. With your team, design a set of focus group.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd